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Building Strongholds: The Ultimate Moat Stock Research Checklist for Investors

You know the old saying, “it’s hard to hit what you don’t aim for.” If you have never heard it, now you have. I like checklists whether it be for shopping, priorities or in this case what to look for in a good stock. I have a page on the site that outlines our quantitative screening process.

This checklist covers the things I look for in a good stock to own. Keep in mind that not every stock is going to check every box on the list. Obviously, the more the better. Some are must haves and some are nice to haves. What follows is my checklist that I go through with every stock.

Must haves

Competitive Advantage Questions
Is there a moat?
What is the source? (Network effect, cost advantages, etc…)
How wide is the moat and how long might it be defensible?
Does a monopoly or duopoly exist?

Free Cash Flow
Does the company have a solid free cash flow history?

The Rest

Capital Allocation
Are buy backs at reasonable prices?
Do recent mergers or acquisitions make sense?
What is the ROIC or ROCE history?
Is R&D supportive of company growth?

Leadership
How long has the CEO been at the helm?
What is the CEOs experience with the company/industry?
Is the company founder led?
Is leadership satisfied with itself or striving?
Are leadership incentives aligned with investors?
Is pay structure reasonable?
Overpromise and underdeliver or underpromise and overdeliver?

Culture
What are the Glassdoor numbers for employee satisfaction?
What are customer relationships with the company?
What do customers say versus do with the company?
What is leaderships language and focus?

Investor Experience
Is the stock subject to seasonality?
What is the stocks valuation history P/FcF, P/S, etc…?
How does the stock measure up to industry comparisons on valuation?
Where is the stock relative to its previous high price?

This website and associated newsletter along with its content/links are not financial advice. Nothing in this newsletter is an investment recommendation. All content is created for entertainment, educational, or informational purposes only. My strong buy, accumulate, hold, reduce or sell opinions are exactly that – opinions. Be sure to do your own research for your own particular circumstances or higher a professional advisor.

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